China Tariff Report Released, Including Products Eligible for Exclusions
In this video from The Franklin Partnership, contributing author Omar Nashashibi discusses the Biden administration’s long-awaited review of the Section 301 tariffs on Chinese imports first imposed by former President Trump starting in 2018.
Required by law after four years, the Office of the U.S. Trade Representative (USTR) on May 14 released the review of China’s acts, policies, and practices related to technology transfer, intellectual property, and innovation. Along with the report’s release, USTR announced it will increase the tariff rate on select imports from China over the next two years.
Starting in 2024, the rate increases to 25 percent for:
- Non-lithium-ion battery parts,
- Lithium-ion electric vehicle batteries,
- Select critical minerals,
- Ship to shore cranes,
- The classification of other critical minerals under their HTS code,
- Facemasks, and
- Steel and aluminum products.
Also in 2024, the tariff rate is quadrupled to 100 percent for electric vehicles from China to 50 percent for solar cells and syringes and needles.
In 2025, the tariff on semiconductors from China under the Section 301 tariff action increases to 50 percent. The products seeing an increase to 25 percent in 2026 include lithium-ion non-electrical vehicle batteries, natural graphite, permanent magnets, and medical gloves.
The rates increase to different levels as some of the products appear on Lists 1, 2, or 3, which are currently subject to a 25 percent tariff or on List 4a, covered with a 7.5 percent tariff rate. The action taken by USTR does not eliminate nor reduce any tariffs on imports from China.
The Section 301 tariff exclusion process
USTR did, however, announce it would restart the Section 301 tariff exclusion process on a limited basis. Upon imposing the tariffs on China in 2018, former President Trump established a process allowing importers to apply for an exclusion from having to pay tariffs. Only 429 exclusions remain out of thousands granted in the past and those expire on May 31, 2024. President Biden did not allow for further exclusion requests when he took office, leaving the process closed for several years.
Chinese imports eligible for tariffs exclusion
On May 14, USTR released a list of 312 imports from China eligible for an exclusion, all appearing under Chapter 84 of the harmonized tariff schedule, covering nuclear reactors, boilers, machinery and mechanical appliances or Chapter 85 electrical machinery and equipment and parts appearing under both those chapters. The imported products used for machinery in domestic manufacturing eligible for an exclusion request appear in appendix K of the report.
USTR will provide more details on the process for requesting an exclusion and which steps a requestor must take. Sources indicate as in the past, the exclusions will be temporary in nature and will undergo a review by the agency and possibly the public, prior to approval.
In addition to restarting a tariff exclusion process, USTR is also planning temporary exclusions on 19 imports of certain solar manufacturing equipment from China on appendix L.
Additional USTR recommendations
The review included three recommendations aside from establishing an exclusion process targeting machinery used in domestic manufacturing and the 19 solar machinery exclusions. They include:
- Allocating additional funds to United States Customs and Border Protection for greater enforcement of Section 301 actions,
- Greater collaboration and cooperation between private companies and government authorities to combat state-sponsored technology theft, and
- Continuing to assess approaches to support diversification of supply chains to enhance our own supply chain resilience.
The report concluded while the Section 301 actions have been effective in encouraging China to take steps toward eliminating some of its technology transfer-related acts, China has not eliminated many of its technology transfer-related actions which continue to impose a burden or restriction on U.S. commerce.
Releasing the report is an important step for the Biden administration as Trump discusses imposing tariffs of 100 percent on vehicles and even 10 percent on imports from allies. The USTR actions start to provide both importers and manufacturers of products competing with China more clarity on Biden’s tariff policy.
How we can help
For those importing from or competing with Chinese manufacturing imports, it’s important to reach out to CLA to identify whether any of the recent actions impact your operations. We can help identify exclusion eligibility or to better understand the implications of the tariff increases.
This is a significant step and marks the first time we have seen substantive changes to the Section 301 tariff action since 2019. We will keep you updated as USTR releases more details on the exclusion process.
Jennifer Clement is an executive sales and marketing leader specializing in value creation for the C-suite. In her current role at CLA, Jennifer collaborates on strategy with executives of global manufacturing and distribution companies to accelerate results. Previously Jennifer served as a Global Business Acceleration Leader for Complete Manufacturing and Distribution (CMD). During her time with CMD, Jennifer lived and worked in Asia from 2015-2019. Prior to CMD, she spent 10 years in senior care technology. Jennifer started her career at Johnson Controls (JCI) and spent nine years in leadership roles; followed by five years at Rockwell Automation (ROK) leading c-suite strategy and marketing operations.
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